Expert panels in Melbourne and Sydney explored the key dynamics shaping the year ahead, highlighting a shared narrative of transformation: Melbourne is navigating a period of restructuring amidst market challenges, while Sydney is poised for robust growth across key sectors in 2025.

The strong turnout at both events underscored the industry’s commitment to staying ahead of emerging trends. Attendees gained actionable insights into market dynamics, with discussions closely aligned to the ETRE Asia Pacific 2025 report, which identifies five pivotal trends influencing Australia’s property sector:

1. Japan Approaches Late Cycle as Australia Rebounds
2. A New Era for Offices
3. Logistics Evolve as Data Centers Dominate
4. Student Housing Leads as Senior Housing Adopts Land-Lease
5. Australia’s Shift in Development Funding

Japan Approaches Late Cycle as Australia Rebounds

The ETRE Asia Pacific 2025 report reveals a slowing Japanese market as Sydney and Melbourne regain momentum. Transaction volumes, yields, and interest rates have plateaued among the top-rated cities, but Sydney shines with a bullish outlook amid Australia’s asset repricing trend. Rising debt costs are driving owners to adjust pricing, attracting global funds to long-unsold core properties in Sydney. Meanwhile, Melbourne offers opportunities for distressed purchases, with signs of recovery anticipated in 2025.

At the Sydney event, Sameer Chopra, Head of Research (Pacific and ESG) at CBRE , highlighted potential interest rate cuts as catalysts for unlocking new funding opportunities in Australia, with Sydney (ranked third) and Melbourne (ranked sixth) continuing to rank highly as strong investment prospects (See Exhibit 1). Marc Lucas, Managing Director at 151 Property, echoed optimism, forecasting strong growth in the industrial and logistics sectors, fueled by fulfillment centers, data centers, and green technologies. Australia’s resurgent manufacturing sector is expected to further bolster industrial market prospects.

A New Era for Offices

Australia’s office sector remains in flux. The protracted buyer-seller standoff, exacerbated by international investor exits since 2021, has gradually eased, with price adjustments narrowing the gap. Despite this, challenges persist, particularly for outdated B-grade properties facing obsolescence. Hybrid work models are reshaping demand, as tenants prioritize modern offices equipped with cutting-edge amenities and technology.

At the Melbourne event, Miriam Patterson, Fund Manager at Charter Hall, highlighted strong performance in A and Premium-grade offices but noted the high cost of ESG upgrades for older buildings. ESG initiatives, though critical, are encountering resistance in Melbourne’s strained market, where approximately 30% of CBD offices require extensive upgrades. Mark Pomeroy, CEO of Pomeroy Pacific, emphasized the need for streamlined taxes and governance to attract foreign investment, underscoring the urgency of innovation to revitalize Melbourne’s office market.

Logistics Evolve as Data Centers Dominate

The logistics sector is undergoing a transformation, with urban-adjacent markets experiencing zero vacancy and sustainable rental growth. These areas stand in contrast to oversupplied big-box facilities. Meanwhile, data centers are emerging as pivotal assets, driven by AI adoption and demand for low-latency facilities.

Leonie Wilkinson, ULI Australia Chair and Senior Vice President at Brookfield (Asia Pacific and the Middle East), emphasized the role of AI in reshaping logistics and data centers. These facilities, with low latency and flexibility, are perfectly positioned to meet the needs of a data-driven future. Lucas projected continued growth in green technology, manufacturing, and fulfillment centers, underscoring the sector’s dynamic evolution.

Student Housing Leads as Senior Housing Adopts Land-Lease

The living sector, encompassing multifamily, senior housing, student accommodation, and co-living, remains a focal point for investors. However, rising construction costs and regulatory challenges have shifted attention to alternative residential concepts. Student housing and senior land-lease markets have emerged as promising opportunities, balancing economic potential with social considerations.

Louise Kavanagh, Chief Investment Officer at Nuveen Real Asset Income and Growth Fund, highlighted Australia’s market stability, attracting pension funds globally. She emphasized student accommodation as a core focus within the alternative residential asset class for the coming year. Chopra echoed this sentiment, expressing optimism about sustained demand for student housing, despite caps on international students. He projected market normalization, balancing social concerns with the economic potential of student immigration. Australia’s residential sector is adapting, with student housing and senior land lease markets leading the way in innovation and growth.

Australia’s Shift in Development Funding

Australia’s construction sector faces escalating costs and labor shortages, prompting a pivot toward private debt financing. Non-bank lending now in the country accounts for 60% of the Asia Pacific region’s funding, with significant interest from Singapore and Japan. Flat hedging costs for Australian-dollar investments have further increased Japan’s appetite for assets in Australia, including CBD offices and living-sector developments.

At the Sydney event, Kavanagh highlighted the widespread challenges across the Asia Pacific, particularly the impact of soaring construction inflation on development. For instance, construction costs in Japan have surged by 40–50%, while in South Korea, the situation is further exacerbated as construction companies are no longer able to provide guarantees to banks. Andrew Iles, Associate Director at PwC, emphasized the growing reliance on private debt as traditional financing options become increasingly constrained. This shift in funding dynamics underscores the vital importance of innovative capital solutions in navigating the complexities of a rapidly evolving development landscape.

What’s next? Unlock key insights shaping the property industry in 2025—Download the Emerging Trends in Real Estate® Asia Pacific 2025 Report Today.